Being a sole trader is often referred to simply as being 'self-employed', though there are other forms of self-employment (such as being a contractor).
Sole trader is the most popular structure for a start-up, and also the simplest. You pay income tax on your profits (rather than corporation tax), so any profits above the higher rate threshold will be taxed at 40%, and profits above the additional rate threshold will be taxed at 45%. Depending on your profits, you may also have to pay National Insurance (NI) contributions.
Being a sole trader does not necessarily mean you work alone. You can employ staff, so long as you inform HMRC and follow employment law.
Advantages of being a sole trader
- As a sole trader you pay no fees to register, you have very little red tape
- You are in full control of business decisions
- You get to keep all the profits from the business, after tax
- Your business’ data is kept private (compared to other business types where data is visible at Companies House)
Disadvantages of being a sole trader
- The main drawback is that your business and personal finances are not legally separate. This means that, if the business has debts or issues, any liability can be met from your personal wealth. This exposes you to more personal risk than other business structures, so may not be suitable for a high-cost start-up.
How can we help with sole trader bookkeeping?
If you operate a sole trader business, it is your responsibility to notify HMRC of your earnings, as well as pay all necessary taxes. Therefore, the following records must be kept and regularly filed in order to do this correctly:
Not only do we assist in bookkeeping and preparing sole trader annual accounts, we also help with the set-up of new sole trader businesses, providing you with a strong foundation to build your brand upon.
Why choose Hysons?
At Hysons, we believe in tailoring our solutions to best suit the nature of your business. Our experienced partners and specialist accounting consultants will work on a one-to-one basis with you, from initial consultation to the delivery of reports. This ensures your targets are being met and your accounts stay well managed, giving you one less thing to worry about.
To find out how your business could benefit from our bespoke sole trader bookkeeping service, contact Hysons, Chartered Accountants in Hampshire and book a free accounting consultation.